Correlation Between Ecolab and Balchem

Can any of the company-specific risk be diversified away by investing in both Ecolab and Balchem at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ecolab and Balchem into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ecolab Inc and Balchem, you can compare the effects of market volatilities on Ecolab and Balchem and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ecolab with a short position of Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Balchem.

Diversification Opportunities for Ecolab and Balchem

-0.08

Correlation Coefficient

Ecolab  Balchem

Good diversification

The 3 months correlation between Ecolab and Balchem is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem and Ecolab is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ecolab Inc are associated (or correlated) with Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of Ecolab i.e., Ecolab and Balchem go up and down completely randomly.

Pair Corralation between Ecolab and Balchem

Considering the 90-day investment horizon Ecolab Inc is expected to generate 1.03 times more return on investment than Balchem. However, Ecolab is 1.03 times more volatile than Balchem. It trades about -0.04 of its potential returns per unit of risk. Balchem is currently generating about -0.06 per unit of risk. If you would invest  27,855  in Ecolab Inc on August 26, 2025 and sell it today you would lose (975.00) from holding Ecolab Inc or give up 3.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ecolab Inc  vs.  Balchem

Ecolab Inc

Risk-Adjusted Performance

Weakest

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Balchem

Risk-Adjusted Performance

Weakest

Over the last 90 days Balchem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Balchem is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ecolab and Balchem

The main advantage of trading using opposite Ecolab and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Balchem can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Balchem will offset losses from the drop in Balchem's long position.

The idea behind Ecolab Inc and Balchem pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.